Financial Attest Audit Report on the accounts of Sindh Resilience Project Project Implementation Unit, Provincial Disaster Management Authority, (PIU-PDMA), Sindh WB Loan Project ID P155350 WB IDA-5888 Financial Year 2017-18 AUDITOR GENERAL OF PAKISTAN TABLE OF CONTENTS ABBREVIATIONS AND ACONYMMSS .........................................................-.................. P R ETFA C E .. ................ ............. ....... ....- ....................... ............ . ... . ................ .... ..... i PA R T -1 .... . . .... . ........................... .......... .......... ...... ............. ........................ ................. ii P roject O veryiew ............................................................................ ........... Auditor's Report 'to The Management (Audit Opinion).................................. 2 Financial Statements ........................................................................................ 3 P A R T -II ........................................ .......L. ............................................... II Management letter ......................................................................................... 12 Executive Summary ..............................my........................................................ 13 1 Introduction............................................ .......................................... 14 2. Audit Objectives ..............................j1................................................ 14 3. Audit Scope And Methodology .........................tgy.......................14.... 14 4. Audit Findings And Recommendations............................................. 15 4.1 financial Management..................................................... 15 4.2 Compliance with Loan Covenants............................................. 21 4 .3 Sustainability.............................................................................. 22 4.4 Overall Assessment................................................................... 22 5. CONCLUSION ................................................................................. 23 ACKNOWLEDGEMENT ................................................................................................ 24 ABBREVIATIONS AND ACRONYMS AGP Auditor General of Pakistan DAC Departmental Accounts Committee DM Disaster Management GFR General Financial Rules IBRD International Bank for Reconstruction Development IDA International Development Association ISSAl International Standards of Supreme Audit Institutions IPSAS International Public Sector Accounting Standards NSO National Support Organization P&D Board Planning & Development Board PDMA Provincial Disaster Management Authority PSC Program Steering Committee SFR Sindh Financial Rules SRP Sindh Resilience Project WB World Bank PREFACE The Auditor General conducts audits under Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. The audit of foreign aided project titled "Sindh Resilience Project (PDMA component) for the financial year 2017-18 funded by the World Bank was carried out accordingly. The Directorate Gcncral Audit (Disaster Management), Islamabad conducted audit of foreign aided project titled "Sindh Resilience Project (PDMA component) during October, 2017 for the financial year 2017-18 with a view to reporting significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the project. In addition, Audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the project. The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the project. The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-II contains Executive Summary, Management Letter and Audit Findings. The Report has been prepared for submission to the World Bank in terms of loan agreement with Government of Pakistan. (Adnan Ra ique) Director General December al, 2018 Islamabad PART-I 1. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT 3. FINANCIAL STATEMENTS 111 PROJECT OVERVIEW Name of Project: Sindh Resilience Project (PDMA component) Sponsoring Authority: World Bank Executing Authority: Provincial Disaster Management Authority (PDMA), Sindh Loan No. / Project ID: P 155350 PC-I Cost: Loan: Rs 1,996.70 million GoS: Rs 499.170 million Date of Commencement: 20.06.2016 Actual Date of Commencement 13.08.2016 Date of Completion (as per PC-I) 2021 Date of Approval as per CDWP 08.06.2016 Loan Closing Date 28.02.2022 Loan Utilization Status in FY 2017-18 Rs 18.697 million Progressive Expenditure upto FY 2017-18 Rs 24.762 million I AUDITOR'S REPORT TO THE MANAGEMENT (Audit Opinion) We have audited the accompanying financial statements of Sindh Resilience Project comprising Statements of Receipts and Payments, Statement of Cash flows together with the notes forming part thereof for the year ended 2017-18. Management Responsibility It is the responsibility of project management to establish and maintain a system of internal controls, and prepare and present the Statement of Cash, Receipts and Payments in conformity with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion: a) The financial statements present fairly, in all material respects, the cash receipts and payments by the project for the year ended June, 2018 in accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditure has been incurred in accordance with the requirements of legal agreements. (A nan ique) Director General December &1, 2018 Islamabad 2 FINANCIAL STATEMENTS FOR THE YEAR ENDED ON JUNE 30, 2018 3 GOVERNMENT OF SINDH OFFICE OF THE PROJECT DIRECTOR SINDH RESILIENCE PROJECT (PDMA COMPONENT) Bunglow No:27. Park Lane No- 2- Schar Street No. 21, OffKhayaban-a-Nishat. D4A. Phase -VI. Karach Phone, 021-99332496-99 No.PD/SRP/Audit/2018/1 L.. Dated 301h August,2018 Director General (Audit), Disaster Management Department. Auditor-General of Pakistan, First Floor Block B-11 Benevolent Fund Building, Zero Point, Islamabad. SUBJECT: SUBMISSION OF FINANCIAL STATEMENT FOR FY 2017-18 OF SINDH RESILIENCE PROJECT (PDMA COMPONENT) PROJECT ID 155350, TF I APPROVAL # IDA 58880. Dear Sir, Reference your letter # 34-Audit Plan(HQ)/TP/2018-19/Vol-1l/155 dated 4th July,2018. Please find enclosed required Financial Statement for FY 2017-18 for mandatory audit attestation by your department. 2. We would appreciate for your early completion of the said audit. MUHAMMAD ALl SHAIKH Project Coordinator Slndh Resilience Project (PDMA) Enclosed: Financial Statement FY 2017-18 '4 4 SINDH RESILIENCE PROGRAMME PDMA (COMPONENT) - CREDIT No: 5888 (Pk) Statement of Cash Receipts and Payments For the year ended June 30, 2018 FY-2017-201 FY-2o o2017 NOTES GoS Funding Donor Fundin T Donor Fun1n Total RECEIPTS Receipts from IDA (W8 ) - 29657 29657 6346 .346 Receipts from GoS (1st Qtr) 1,461 TOTAL RECEIPTS 1,461 29.657 31,117 £346 6.346 PAYMENTS Improving Risk Identification and using Risk Information for Development Decision - Making Strengthening Disaster Risk Management Agencies 4-2 - 5850 5.850 0.650 0.650 Enhancing Fiscal Resilience 4-3 - Capital Expenditure 4-4 . 1.540 1.540 Operational Expenditure 4-5 1.461 11,386 12.847 3.875 3.875 TOTAL PAYMENTS 1.461 17236 18.697 56065 6065 Net payments 1,461 17236 18.697 6,065 6.065 Net Receipts 1461 29,657 31.117 6.346 6346 Increase/Decrease in cash 142 12.421 0211 0_281 Cash at the beginning of the Year - 0.281 0.281 - * Increase/Decrease in cash 12.421 12.421 0.281 0.281 Cash at the end of the year - 12,702 12.702 0.281 0.281 AHM DS B MUHAMMAD AL SHAIKH Fina Project Coordinator, Sia PMa (Comoent) Speialst SRP, PDMA (Component) SRP, PDMA (Component) 5 SINDH RESILIENCE PROGRAMME PDMA (COMPONENT) - CREDIT No: 5888 (Pk) Cash Flow Statement For the year ended.Junet&q 2018 Rupees in million FY_2017-2018 NOTES IIDonor05 j Dor SGoS Fund ng Dng Total GoS Fund Fn Total FundingFudn Cash at the beginning of the Year 0.281 0.281 leceipts During the year 3 1.461 29.657 31.117 6,346 5346 Extra Budgetary Receipts Total Available Funds 1.4616.346 6.346 Payments During The Year improving is en Uication and using Hisk oforma ion or Dveopment Decision - Making 4-1 Strengthening Disaster Risk Management Agencies 4-2 5.850 5.850 0650 0.650 Enhancing Fiscal Resilience 4-3 - Capital Expenditure 4-4 - -1540 1540 Operational Expenditure 4-5 1.461 11.386 12. 847 3.875 3.875 Total Payments During The Year 1.461 17.236 18.697 - 6.065 Cash at the end of the year 1 12.702 12.702 - 0.281 0.2 6 ED B, MUHAMMAD ALI SHAIKH nc Ma agement Specialist, Project Coordinator, P PDMA (Component) SRP, PDMA (Component) 6 SINDH RESILIENCE PROGRAMME PDMA (COMPONENT) - CREDIT No: 5888 (Pk) NOTES TO THE FINANCIAL STATEMENT 1. THE PROJECT FOR THE PERIOD Sindh Government had conceived a project titled Sindh Resilience Project (SRP) with assistance of World Bank to Improve resilience of the people and economic assets to floods and drought. The SAP has two components, (1) SRP - irrigation (Component) and (ii) SRP - PDMA Component). The &Indh Resilience Project - PDMA (Component) will primarily focus on key disaster management Institutions In terms of strengthening operational systems and capacities at the provincial and district levels in addition, the Component will support other departments at the Government of Sindh - through the Provincial Disaster Management Authority (PDMA) Sindh to develop greater fiscai resilience' through strengthening fInancial capacity and riskfinancing mechanisms, and mainstream disaster risk reduction in development planning and budgetIng processes, The Sindh Resilience Project - POMA (Component) was approved by CDWP on 8th June 2016 at cost of Rs.2,495.897 million including 80% of foreign funding through World Bank amounting to Rs.1,996.70 million for five years from 2016-17 to 2020-22 and 20% of GoS funding amounting to Rs.4 99.197 million. 2. SIGNIFICANT ACCOUNTING POLICIES Following accounting policies have been applied in dealing with items, which are considered material to Slndh Resilience Project [PDMA Component) financlal statements 2.1 BASIS OF PREPARATION The financial statement has been prepared in accordance with International Public Sector Accounting Standard (IPSAS) Cash Basis. 2.1 ACCOUNTING CONVENTION These financial statements have been prepared under the historical cost convention with cash basis of accounting. Accordingly, expenses ire rmccognized when paid rather Incurred. 2.3 CURRENCY The financial statements have been prepared in equivalent Pak Rupees, The receved foreign currency amounts were translated / converted into Pak, Rupees at the SP Weighted Average Buying Rate of exchange rate prevailing on the date of transfer of funds by the donor and payments were translated notionally at the SBP rate of exchange at which the foreign currency was purchased by the SBP ( date of reclept of funds from the donor in SBP). The financial statements have been prepared in Pak Rupees. 2.4 GOODS / PHYSICAL ASSETS Fixed Assets are stated at cost. 2.5 GOVERNMENT FUNDS & GRANT Funds allocated to Project from Government of Sindh & Donor Agencies are not recognized till these have been accounted for by the State Bank of Pakistan against the Special Account maintelned with the National bank of Pakistan, income Tax Building Branch, Karachi. No future related funding commitments have been recognized against any financing source. 2.6 FOREIGN EXCHANGE TRANSACTIONS Transaction in local and foreign currencies Is accounted for In compliance with the Finance Diislon O.M. No. F.2. (1) - BR-i1/2007- 949 dated 2nd August,2013. 2.7 PROVISIONS Due to cash basis of accounting, no provision is recognized in the financial statements. However, if there is any event which may have a legal or other obligation with contingent financial implications, then it is identified by a separate disclosure In the notes to the financial statements. 2,8 OFFSETTING Neither assets-ilabilities nor fund flow & expenditure have been set off in the financial statements. AH EDS Fin ac ana ment Specialist, MUHAMMAD AUSHAIXI SOP, PDMA IComponent) Project Coordinatol SRP, PDMA (Componenr 7 SINDH RESILIENCE PROGRAMME PDMA (COMPONENT) - CREDIT No: 5888 (Pk) NOTES TO THE FINANCIAL STATEMENT For thg ereddlue3.21 FY-2017-2018 F-2016-2017 IDonorDor GoS Funding Funding Total GFin lTota Funding Funding Note 3 Receipts Receipts from IDA - AF 29,656,570 29,656,570 6,346,298 6,346,298 Receipts from GoS (1st Qtr) 140,22 1,46,9g2 Total Receipts 1,460,921 29,656,570 31,117,492- 6346,298 61346,298 AHME 4 MUHAMMAD AU SHAIKH Prole ordl tor, Project Coordinator, SRP, PDMA (Component) SRP, PDMA (Component) 8 N RESILIENCE PROGRAMME -pMA (COMPONENT) - CREDIT No: 5888 (Pk) NOTES TO THE FINANCIAL STATEMENT For the year ended une 30. 2018 Note -4 FY-2017-2018 F?-2016-2017 GSFundIngJ Donor Funding J T'otal j Gos Funding Pnffunding j Total ImprRoving Risk Iden-tifcation and using Risk Information for Development 4-2 Strengthening Disaster Risk Management Agencies Capacity Assessment of PDMA Sindh and ODMAs 5,8506000 5850,000650,000 650,000 5,850,000 5,850,000 650,000 650,000 4-3 Enhancing Fiscal Resflence 4-4 Cpgital Expenditure, Furnitue Fixture 510,000 510,000 - [,T.Equlpments 851,308 85 1,308 Office Equipments 179,000 179,000 [Vehidles 1,540,308 1,540,308 4-5 operatIonal Expenditure Salaries and Benefits 1,460,92 7,426,734 8,887,656 1,494,741 1,494,741 Rent of Office Premises 2,578,565 2,578,565 2,344,155 2,344,155 Other Operational Expenditures 1,380,725 1,380,725 35,654 35,654 1,460,922 11,386,024 12,846,946 - 3,874,550 3,874,550 rTota[Upendlt i Ir eUne8MUHAMMAD ALI SHAIKH anal anagement Specialist, Project Coordinator, P PnMA (rnnnnt1 rjc oodntr qRP PnMA [rnmnnnPnt1 9 d) Total of acceptances e) Particulars of outstanding forward exchange contracts (e.g. rate, dates, rupees and foreign currency amounts etc.) f) Total of outstanding liabilities under documentary credits; g) Other- please give details. 9 Other Information A list of other banks, or branches of your bank, where you are aware that relationship has been established during the period Yours truly. For and on behalf of Ban DIrector General Audit (0M), Bk Islamabad Aut6bdP (Authorized SIgnatory) Clie 5(position) 10